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June 24, 2010

Chinese Vice Premier Calls for More Urbanization

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Chinese Vice Premier Li Keqiang (who is likely to lead China starting in 2013) called for more efforts to accelerate China's urbanization, as part of the government's efforts to promote economic restructuring and expand domestic demand during this process.

* urbanization would bolster domestic demand, improve people's livelihoods and solve rural problems
* China's urbanization, which still has much room for expansion, is China's largest source of domestic demand as well as the largest potential driver for development.

A 2009 study by the McKinsey Global Institute forecasts that by 2025, the number of urban dwellers in China will have grown by 350 million

China Can Urbanize to Prosperity -
This plan is from Stephen Green, who is head of greater China research at Standard Chartered Bank.

City dwellers earn more and consume more in China.


In China today, only around 50% of people live in towns and cities. The ratio has been rising by about one percentage point a year and should continue at around that pace for the next 10 to 20 years. It is hard to exaggerate the importance of this shift. Urbanization makes it easier to educate people and to provide decent health care and other services. Urbanization allows young people to work in offices, to be creative and scientific (and more productive and better paid), rather than toiling on the farm. And as incomes rise, urban dwellers have more spare cash to go dining, karaoke-ing, traveling and shopping. To take one simple example: The penetration of air conditioners and fridges has reached 100% in urban areas, but only 8% and 30% in rural areas.

China's government has been reluctant to promote urbanization. Some 200 million people are living outside of their home villages today.

A smart strategy for the next 10 years would both encourage more urbanization and make that urbanization more humane and productive. Several steps could help.

First, the government should provide decent public rental accommodation so that migrants can bring their families and put down roots. Singapore and Hong Kong show how this can be done—both have successfully provided a mix of rental and subsidized for-sale housing to recent migrants

Although the challenge for China is much larger, some accommodation can be provided by local governments if they are given fiscal resources and incentives to build. At present, they do not have either, so when they do build housing, they tend to sell it, not rent it out, and almost never to newly arrived migrants from the countryside.

Even if local governments in the large metropolitan areas were given the resources and incentives to build public housing, the scale of what's needed is too large for them to meet. Better to allow villages on the outskirts of towns to build accommodation too. This is currently illegal but goes on haphazardly anyway. This should be made legal and then properly regulated.

Second, Beijing should open the social-welfare systems of big cities to rural migrants. Under the residence permit, or hukou, system, if you're a rural migrant without an urban permit, your children cannot go to the local school and you pay much more for a doctor than your urban neighbor. While Shanghai now allows migrant workers' children into its primary schools for free, no other city is willing to do this, certainly not Beijing, apparently for fear of the cost

Finally, China must change how local officials are assessed by their superiors. They currently operate under targets for GDP growth and tax revenues, which create incentives for building infrastructure rather than providing health and education services. Introducing metrics such as the ratio of rural migrant children graduating from secondary school would create better incentives to encourage urbanization.

To pay for all this, policy makers should introduce a real property tax.


Ecocity Testbeds

There are now about 30 eco-cities in various stages of development throughout China.

The sustainable urban community that is furthest along is perhaps the Sino-Singapore Tianjin Eco-City, a site — part nonarable salt pan, part desolate beach — in northeastern China that in 10 to 15 years will have the capacity to house 350,000.

A collaboration between China and Singapore — initiated by the two governments, it is now steered by a 50-50 joint venture between Singapore and Chinese consortiums — the metropolis broke ground last autumn. It will feature a green railway line, the latest in energy- and water-efficient technologies, and more verdant space than almost any other Chinese city. Unlike Dongtan, said Richard Brubaker, founder of Collective Responsibility and professor of sustainability at the China Europe International Business School, it has commitments from companies and investment groups that have provided a high level of support beyond that of its major stakeholders.

Mr. Brubaker says that all of China’s planned eco-cities, not simply Dongtan, ought to be seen as testing grounds — not for similar international projects, but for the country’s existing metropolises. The aim of an eco-city, he said, should be to develop technologies that can then be exported to real megacities; their relatively small scale makes it easier, and far faster, for them to adopt green frameworks. “The eco-city is not necessarily a solution,” he said. “But it’s a place where you can test potential solutions that scale out. None of these things can remain in a 300,000-person Petri dish.”

Mr. French, of AccessAsia, agrees. “So what if you’ve built this eco-city, if down the road, within spitting distance, is a city of 19 million people that is so unsustainable it’s unbelievable?” he said.


Tianjin Ecocity

Sino-Singapore Tianjin Eco-city website

The groundbreaking ceremony of the project was September 2008. The start-up phase of the project (3 sq km) is expected to be complete within the next 3 to 5 years. The entire 30 sq km should be completed in 10 to 15 years' time. Upon completion, the population size has been projected to reach 350,000.

The 4 sq km start-up area of Tianjin ecocity already boasts infrastructure, broad roads and greenery which gives the feel of 'walking in a garden'

Soon there will be more changes, including the long-anticipated construction of a light transit railway (LTR) system which will help the project achieve a key target of making eco-friendly public transport a way of life in the Eco-city.

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